The Centre must repair the stalling economy fast – The Hindu BusinessLine

So far, the focus has been on restarting investments. Now, demand-side measures have become imperative. The time appears ripe to slash personal income tax rates across-the-board

The Central Statistics Office’s first advance estimates suggesting that India’s real GDP growth is likely to dip to a decadal low of 5 per cent in FY20 is not particularly shocking, given that the first half of the year has already gone by with a growth rate of just 4.8 per cent. Even getting to this 5 per cent estimate entails some optimistic assumptions. In arriving at this number, the CSO has budgeted for a sharp bounce-back in private final consumption expenditure (PFCE) from 4.1 per cent in the first half to 7.5 per cent in the second half. Otherwise, it forecasts a slippage in gross fixed capital formation (GFCF) from 2.5 per cent growth in the first half to a 0.6 per cent decline and a slowing pace of government spending from 12.3 per cent to 8.7 per cent. Even more worrying is the estimated nominal GDP growth rate of 7.5 per cent for FY20 — the lowest in four decades. A collapse in the nominal GDP growth can send the economy tumbling down a rabbit hole. Low income growth inevitably triggers consumption cutbacks, weak corporate toplines dent investments and low tax collections curb the Government’s ability to stimulate the economy through spending. These numbers warn that the window of opportunity for the Centre to effect repairs to the stalling economy is fast closing, even as the honeymoon period of low oil prices seems to be ending.

via The Centre must repair the stalling economy fast – The Hindu BusinessLine

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